By Niket Nishant
(Reuters) -Reddit is evaluating a letter from Nokia (HE:NOKIA) Technologies alleging it infringed some of the telecom and cloud network firm's patents, the social media platform said on Tuesday, ahead of its high-profile initial public offering (IPO) this week.
The disclosure follows an inquiry by the Federal Trade Commission focused on Reddit's sale, licensing and sharing of user-generated content with third parties to train artificial intelligence models.
"Nokia is seeking compensation for the use of (its) key inventions and will reinvest the royalties in the development of next-generation communication and multimedia technologies," the company said in a statement.
Reddit, which has been involved in patent infringement litigation in the past, is targeting a valuation of up to $6.5 billion for its IPO in one of the most-anticipated share sales in recent years.
"As we face increasing competition and become increasingly high profile, the possibility of receiving more intellectual property claims against us grows," Reddit warned in its statement.
Patent disputes are common among social media businesses, but most of them get resolved without a trial, said Michael Parks, partner at law firm Thompson Coburn LLP.
Reddit's dispute with Nokia has not yet led to a lawsuit, but the Finnish company has previously been involved in some major patent challenges.
Reddit's IPO is between four and five times oversubscribed, Reuters reported on Sunday, making it more likely to attain its target valuation. It is expected to debut on the New York Stock Exchange on March 21.
"If you are about to embark upon an IPO and you have a major patent infringement lawsuit against you, it is going to raise the eyebrows of investors," Parks said.